The December 2008 NAMA modalities text made simple

The new NAMA modalities text, issued by the
Chairman of the negotiation on Non-Agriculture Market Access, builds
upon the previous three texts and provides further details and wider
options for ministers to negotiate a balanced final package for the
full modalities. The text is now almost complete.

Tariff reductions for industrial products would be made using a
“simple Swiss” formula with separate coefficients for developed or for
developing country members. But whereas the coefficient for developed
members will be the same applicable to all of them, there will be a
menu of options for developing members that will apply according to
the scale of the flexibilities they choose to use. The lower the
coefficient the higher the flexibilities and vice versa. A Swiss
formula produces deeper cuts on higher tariffs. (A higher coefficient,
as envisaged for developing members, means lower reductions in
tariffs).

The Chair's draft modalities contain these coefficients: 8 for
developed members and 20, 22 and 25 for developing. Therefore
not all developing countries applying the formula would apply the same
coefficient. The use of the different coefficients would depend on
three new options:

A member choosing to apply the lowest coefficient, 20, would be
entitled to make smaller or no cuts in 14 percent of its most
sensitive industrial tariff lines, provided that these tariff lines do
not exceed 16 percent the total value of its NAMA imports. These
tariffs would be subject to cuts equal to half of the agreed formula
reduction. As an alternative, the member can keep 6,5 percent of its
tariff lines unbound or exclude them from tariff cuts, provided they
do not exceed 7,5 percent of the total value of its NAMA imports

A member choosing to apply a coefficient of 22 would be entitled to
make smaller or no cuts in a smaller number of products: up to 10
percent of its most sensitive industrial tariff lines from the full
effect of the formula, provided that these tariff lines do not exceed
10 percent of the total value of its NAMA imports. These tariffs would
be subject to cuts equal to half of the agreed formula reduction. As
an alternative, the member can keep 5 percent of its tariff lines
unbound or exclude them from tariff cuts, provided they do not exceed
5 percent of the total value of its NAMA imports.

A member choosing to apply the highest coefficient, 25, will have to
apply it on all its products without exceptions.

The proposed coefficients would mean:

The maximum tariff in developed countries would be bellow 8 per cent.
This would mean that developed countries would have bound tariffs at
an average of well below 3 per cent, and tariff peaks below 8 per cent
even on their most sensitive products.

The majority of tariff lines for developing country members applying
the formula would be less than 12-14 percent, depending on the
coefficient and the flexibilities used. In the developing countries
applying the formula, bound tariffs would be at an average of between
11 to 12 per cent, and only a limited number of tariff lines would
have levels above 15 per cent.

The difference between bound rates and those actually applied would be
substantially reduced.

The tariff reductions will be implemented gradually over a period of
five years for developed members and ten years for developing members,
starting 1 January of the year following the entry into force of the
Doha results.

Overall, the approximately 40 members applying the Swiss formula (the
others have special provisions) account for close to 90 per cent of
world NAMA trade. Among these, four are recently acceded members (RAMs).

The text also contains the following:

A so-called anti-concentration clause, to avoid excluding
entire sectors from tariff cuts. A minimum of 20% tariff lines or 9%
of the value of imports in each tariff chapter would be subject to the
full formula tariff reduction

The Chair's text notes that further work is still required in the
so-called "sectoral initiative". Some members have been engaged in
negotiations which would envisage undertaking deeper tariff reductions
in some non-agricultural sectors. There are 14 sectors currently under
consideration: Automotive and related parts; Bicycles and related
parts; Chemicals; Electronics/Electrical products; Fish and Fish
products; Forestry products; Gems and Jewellery products; Raw
materials; Sports equipment; Healthcare, pharmaceutical and medical
devices; Hand tools; Toys; Textiles, clothing and footwear; and
Industrial machinery.

As a result of a successful sector initiative, tariffs in that
particular sector would be reduced or even brought down to zero. The
chair's text underscores the voluntary nature of the participation in
this initiative but mentions that some members want commitment by
others on participation in the initiative as a way to balance the
overall ambition. There is still no consensus on how and when to
define the commitment of members to participate in sectorals without
altering the non-mandatory character of these negotiations. Such
negotiations would require a "critical mass" of countries joining the
initiative for it to take off. After the adoption of the modalities,
members choosing to join, would have 45 days to indicate their
participation in the negotiations if they have not done so by the
establishment of modalities.

The 32 poorest countries (Least-developed countries or LDCs) are
exempt from tariff reductions; there are special provisions for
approximately 31 SVEs and for 12 developing countries with low levels
of binding. As a result, relatively weaker developing economies will
retain higher average tariffs and greater flexibility on how they
structure their tariff schedules. But they will nevertheless
contribute to the negotiations by significantly increasing the number
of bindings and reducing "the water" (the difference between bound
rates and those actually applied) and binding a high number of their
tariffs. Bolivia, Fiji and Gabon are singled out as special cases.
There are also proposed solutions for members with preferential access
to developed country markets who would see their preferences erode
because of the overall tariff reductions. In addition, there are
provisions for other developing members who do not enjoy preferential
access and would be disproportionably affected by such a solution
(Bangladesh, Cambodia, Nepal, Pakistan and Sri Lanka)

NTBs, restrictive measures unrelated to customs tariffs that
governments take (such as technical, sanitary and other grounds), are
also part of the negotiation. Proposed legal texts have been submitted
by members on some of these measures, and are compiled in the Chair's
text. The Chair noted that a decision on whether these proposals move
forward to a text-based negotiation would need to be taken at the time
of final modalities.